Filed by sedaredgar.com - Doral Energy Corp. - Exhibit 10.7






NET PROFITS OVERRIDING ROYALTY INTEREST
CONVEYANCE 

          This
Net Profits Overriding Royalty Interest Conveyance (this “Conveyance”)
dated effective as of July 29, 2008, is from Doral Energy Corp., a Nevada
corporation, having its principal executive office and place of business at 111
N. Sepulveda Blvd., Suite 250, Manhattan Beach, California 90266-6821
(“Assignor”), to Macquarie Investments, LLC, a Delaware limited liability
company, whose address is 125 West 55th Street, 22nd
Floor, New York, New York 10019 (“Assignee”). 

W I T N E S S E T H: 

          FOR
AND IN CONSIDERATION OF THE SUM OF ONE HUNDRED DOLLARS ($100.00) and other good
and valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, Assignor by these presents does hereby GRANT, CONVEY,
ASSIGN and TRANSFER, without warranties or covenants of title, express, implied
or statutory, except as specifically set forth in the following paragraph, to
Assignee, and Assignee’s successors in title and assigns, the Net Profits
Overriding Royalty Interest (defined below) in and to the Subject Interests
(defined below). 

          TO
HAVE AND TO HOLD the Net Profits Overriding Royalty Interest, together with all
and singular the other rights, titles, interests, estates, remedies, powers,
privileges and appurtenances thereto, unto Assignee, its successors and assigns,
forever subject, however, to the terms and provisions of this Conveyance.
Assignor hereby grants for itself, its successors and assigns, to WARRANT and
FOREVER DEFEND all and singular the Net Profits Overriding Royalty Interest unto
Assignee, its successors and assigns, subject only to the Permitted
Encumbrances, against every Person whomsoever lawfully claiming or to claim the
same or any part thereof, by, through and under Assignor, but not further. The
Net Profits Overriding Royalty Interest is not a contingent interest but is a
fully and presently vested real property interest. 

ARTICLE I 
CERTAIN DEFINITIONS 

          Section
1.1      Specific Definitions. The following
terms, when used in this Conveyance, have the meanings indicated below (such
meanings to be fully applicable to both the singular and plural forms of the
terms defined): 

          “AFE”
means an authority for expenditure. 

          “Affiliates”
means for any Person (as hereinafter defined), any other Person who directly or
indirectly controls, is under common control with, or is controlled by such
Person. As used in this definition, “control” (including, with its correlative
meanings, “controlled by” and “under common control with”) shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event (i) any Person who owns directly or indirectly ten percent (10%) or more
of the securities having ordinary 




voting power for the election of directors or other governing
body of a corporation or ten percent (10%) or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person, and
(ii) any subsidiary or partner of Assignor shall be deemed to be an Affiliate of
Assignor. 

          “Applicable
Percentage” means thirty-five percent (35%), provided,
however, upon receipt of the cumulative sum of FIVE MILLION Dollars
($5,000,000) in cash proceeds by Assignee or its successors and assigns
hereunder, the Applicable Percentages shall, effective as the first day of the
month following receipt of such sum, automatically decrease to twenty percent
(20%). 

          “Approved
Sales Contract” means an Existing Sales Contract or a Sales Contract
consented to in writing by Assignee. 

          “Assignee”
shall have the meaning set forth in the introductory paragraph of this
Conveyance, and shall include its successors and assigns. 

          “Assignor”
shall have the meaning set forth in the introductory paragraph of this
Conveyance and shall include its successors and assigns. 

          “Base
Rate” means that per annum interest rate announced from time to time by
Citibank, N.A. as its prime lending rate (or if unavailable, the then prevailing
comparable rate announced by JP Morgan Chase Bank, N.A.), plus two
percent (2%) per annum. 

          “Business
Day” means any day other than a day on which commercial banks are authorized
or required to close in New York, New York. 

          “Capital
Costs” means from and after the Commencement Date, on a cash accounting
basis, the aggregate costs incurred and paid for (a) renewals or extensions of
Leases, (b) any drilling, reworking, sidetracking, deepening, completing,
equipping, recompleting, stimulating or plugging back, or (c) constructing
production or gathering facilities which in each case pertain to the Subject
Interests and are authorized pursuant to an Operating Agreement or, if there is
no applicable Operating Agreement in effect, for which notice is given in
accordance with the provisions of Section 7.2; provided,
however, certain costs may be excluded from “Capital Costs” as provided
in Section 7.2. 

          “Code”
shall have the meaning assigned to such term in Section 10.5. 

          “Commencement
Date” means the earlier of (i) 12:01 a.m. local time on the Maturity Date or
(ii) 12:01 a.m. local time on the Loan Termination Date. 

          “Conversion
Agreement” means that certain Conversion Agreement dated effective as of
July 29, 2008 between Assignor and Assignee, as the same may be modified,
amended or restated from time to time. 

          “Conveyance”
means this Net Profits Overriding Royalty Interest Conveyance, as the same may
be amended, modified or restated from time to time. 

2 




          “COPAS”
means the accounting procedures which are a part of an applicable Operating
Agreement or, in the event that there is no Operating Agreement in effect, the
Accounting Procedure for Joint Operations recommended by the Council of
Petroleum Accountants Societies 1995 JOA, (onshore) then in effect with respect
to onshore or offshore operations, as applicable, for the location of the
Leases. 

          “Credit
Agreement” means that certain $50,000,000 First Lien Secured Credit
Agreement dated as of July 29, 2008, as the same may be modified, amended,
restated or rearranged from time to time, between Assignor, as Borrower, and
Macquarie Bank Limited, and its successors and assigns, as Administrative Agent,
and the Lenders party thereto from time to time. References to the Credit
Agreement in this Conveyance shall continue to be effective even if the Credit
Agreement has been terminated in which case references shall be to the Credit
Agreement in its form immediately prior to termination of same. 

          “Crude
Oil” means all crude, condensate and other liquid hydrocarbon substances.


          “Defensible
Title” means, with respect to the Subject Interests, such title that: (a)(i)
entitles Assignor to receive, free and clear of all royalties, overriding
royalties and net profits interests (except the Net Profits Overriding Royalty
Interest created hereby), or other burdens on or measured by production of
Hydrocarbons, not less than the Net Revenue Interests reflected in Exhibit
A for the productive life of the Subject Interests (subject only to the
Permitted Encumbrances), and (ii) obligates Assignor to bear costs and expenses
relating to the maintenance, development and operation of the Subject Interests
in an amount not greater than the Working Interests reflected in Exhibit
A for the productive life of the Subject Interests (subject only to the
Permitted Encumbrances), in such instance, free and clear of any Liens, other
than the Permitted Encumbrances, and any Liens in favor of Assignee and its
Affiliates or which are permitted hereunder, and (b) with respect to any royalty
and overriding royalty interests acquired by Assignor, net profits overriding
royalty interests and/or production interests and any rights Assignor acquires
to receive revenues from production that are not included in the Net Revenue
Interests and Working Interests set forth in clauses (a)(i) and (ii) above, good
and defensible title to such interests, free and clear of any Lien, other than
the Permitted Encumbrances, and any Liens and property interests which are in
favor of Assignee and its Affiliates or which are permitted hereunder. 

          “Dispose”
(including the correlative terms “disposed” or “disposition”) means any sale,
assignment, transfer, conveyance, gift, pledge, distribution, hypothecation or
other encumbrance or any other disposition, whether voluntary, involuntary or by
operation of law, and whether effected directly or indirectly. 

          “Effective
Date” means the date stated in Section 10.7. 

          “Existing
Sales Contract” means all Sales Contracts in effect on the Effective Date
and identified on Exhibit A hereto. 

          “Governmental
Authority” means the government of the United States of America, any other
nation, or any political subdivision thereof, whether state, local or tribal,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising 

3 




executive, legislative, judicial, taxing, regulatory or
administrative powers, jurisdiction or functions of or pertaining to government
over Assignor or Assignee. 

          “Gross
Proceeds” means, on a cash accounting basis, from and after the Commencement
Date, the aggregate gross amount received by Assignor, without duplication, from
or attributable to (a) the Sale of Subject Hydrocarbons produced from all
Subject Interests (including, without limitation, any amounts received by
Assignor with respect to overriding royalty interests, other non-Working
Interests or as the result of a Working Interest owner going non-consent under
an Operating Agreement which are part of the Subject Interests) and (b)
Manufacturing Proceeds, subject to the following: 

          (i)     
If Subject Hydrocarbons are sold pursuant to arm’s length sales contracts, the
Gross Proceeds of such Sale shall be the amount realized by Assignor from such
Sale; 

          (ii)      If
Subject Hydrocarbons are sold pursuant to an Approved Sales Contract, the Gross
Proceeds of such Sale shall be the amount realized by Assignor from such Sale;


          (iii)      If
Subject Hydrocarbons are sold to an Affiliate of Assignor that has not been
approved in writing by Assignee, the Gross Proceeds from such Sale shall be
deemed to be the higher of (A) the amount realized by Assignor from such Sale or
(B) the average of the three highest market prices based upon Sales at the
locations sales are made on the date of execution of this Conveyance received by
any unaffiliated party from the Sale of Hydrocarbons at the foregoing locations
during the period when the Subject Hydrocarbons are sold to an Affiliate of
Assignor; 

          (iv)     
If Subject Hydrocarbons are sold in any transaction other than those described
in clauses (i), (ii) and (iii) hereof, the Gross Proceeds of such Sale shall be
the Market Value of such Subject Hydrocarbons; 

          (v)     
Gross Proceeds shall include all consideration received, directly or indirectly
from Sales of Subject Hydrocarbons, including without limitation advance
payments, payments under take-or-pay (recoupable or non-coupable), production
payments or similar provisions of production Sales agreements but excluding the
effect of financially settled hedge transactions and any proceeds received by
Assignor for the use of Assignor’s facilities located on the Subject Interests
for the storage, transportation, processing or treating of Hydrocarbons on
behalf of a third party; and 

          (vi)      If
any proceeds are withheld from Assignor for any reason (other than at the
request of Assignor or due to the gross negligence of Assignor) such proceeds
shall not be considered to be Gross Proceeds until such proceeds are actually
received by Assignor; provided, however the Gross Proceeds shall
not include any interest, penalty or other amount that is not derived from the
Sale of Subject Hydrocarbons, but, instead, Assignor shall make payment directly
to Assignee of the Applicable Percentage of any such amounts paid to Assignor by
the purchaser of Subject Hydrocarbons. 

          “Hydrocarbons”
means all Crude Oil and Natural Gas. 

          “Invoiced
Costs” has the meaning assigned to such term in Section 3.3. 

4 




          “Lease
Use Hydrocarbons” means any Hydrocarbons which are unavoidably lost in the
production thereof or used by Assignor or the Operator on the Leases or any Unit
in which the Leases are pooled or unitized for drilling and production
(including, without limitation, use for secondary recovery) operations conducted
in the manner of a reasonably prudent operator and in good faith for the purpose
of producing Hydrocarbons from the Leases or from such Unit, but only for so
long as and to the extent such Hydrocarbons are so used. 

          “Leases”
means Crude Oil, Natural Gas and/or mineral leases or portions thereof listed
and described on Exhibit A attached hereto and made a part hereof by
reference, and the lands covered thereby and subject to the depth and acreage
limitations and reservations, if any, set forth in Exhibit A. 

          “Loan
Termination Date” means the date of repayment of all amounts outstanding
under any Promissory Note for any Advances. 

          “Manufacturing
Costs” shall mean the aggregate costs of Processing any Subject Hydrocarbons
that generate Manufacturing Proceeds. 

          “Manufacturing
Proceeds” shall mean the excess, if any, of (a) proceeds realized by
Assignor from the Sale of Subject Hydrocarbons, and any products thereof, that
have been Processed or are the result of any Processing over (b) the part of
such proceeds that represents the Market Value of such Subject Hydrocarbons
before any Processing. 

          “Market
Value” of any Subject Hydrocarbons shall mean: 

          (a)      With
respect to Crude Oil (including field liquids), (i) when sold pursuant to an
Approved Sales Contract, the price established therein, (ii) when sold other
than pursuant to an Approved Sales Contract the highest price available to
Assignor for such Crude Oil, at the lease level, on the date of delivery
pursuant to a bona fide offer, posted price or other generally available
marketing arrangement from or with a creditworthy non-Affiliated purchaser, or
(iii) if neither subsection (a)(i) nor subsection (a)(ii) is
applicable, the fair market value of such Crude Oil, on the date of delivery, at
the lease level, determined in accordance with other generally accepted and
usual industry practices; and 

          (b)     
With respect to any Natural Gas, (i) when sold pursuant to an Approved Sales
Contract, the price established therein, (ii) when sold other than pursuant to
an Approved Sales Contract the average of the three (3) highest prices (adjusted
for all material differences in quality) being paid at the time of production
for Natural Gas produced from the same field in Sales between creditworthy
non-Affiliated persons (or, if there are not three (3) such prices within such
field, within a fifty (50) mile radius of such field) but, for any Natural Gas
subject to price restrictions established, prescribed or otherwise imposed by
any Governmental Authority having jurisdiction over the sale of such Natural
Gas, no more than the highest price permitted for such category or type of
Natural Gas after all applicable adjustments (including without limitation tax
reimbursement, dehydration, compression and gathering allowance, inflation and
other permitted escalation), or (iii) if neither subsection (b)(i) nor
subsection (b)(ii) above is 

5 




applicable, the fair market value of
such Natural Gas, on the date of delivery, at the lease level, determined in
accordance with other generally accepted and usual industry practice. 

          “Maximum
Rate” means the maximum nonusurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
by a creditor under applicable law. 

          “Month”
means that period of time beginning at 12:00 a.m. on the eleventh day of each
calendar month and ending at 11:59 p.m. on the tenth day of the next calendar
month. 

          “Monthly
Net Profit” means the Net Profit calculated on a Monthly basis for each
Month from and after the Commencement Date. 

          “Natural
Gas” means natural gas, casinghead gas and other hydrocarbon substances in
gaseous form, and including all products recovered in the processing of the
foregoing (other than condensate). 

          “Net
Marketing Proceeds” has the meaning assigned to such term in Section
3.3. 

          “Net
Proceeds” means the amount by which Gross Proceeds exceeds Production Costs.


          “Net
Profit” means the amount by which Net Proceeds exceed Capital Costs. To the
extent Net Profit is reduced below zero for any Month, the amount of such
reduction below zero shall be carried forward and utilized in the calculation of
Net Profit in subsequent Months until the negative balance is eliminated. 

          “Net
Profits Overriding Royalty Interest” means an overriding royalty interest in
the Subject Interests and the Subject Hydrocarbons in, under and that may be
produced and saved from the Subject Interests equal to the Applicable Percentage
of the Net Profit attributable to the Subject Interests from and after the
Commencement Date as calculated for each Month. 

          “Net
Revenue Interest” means the decimal or percentage share of Hydrocarbons
produced and saved from or allocable to the Subject Interests after deduction of
all lessor and overriding royalties and other burdens on or paid out of such
production (other than the Net Profits Overriding Royalty Interest created
hereby). 

          “NPI
Operating Statement” has the meaning assigned to such term in Section
8.3. 

          “NPI
Operating Statement Due Date” has the meaning set forth in Section
8.3. 

          “Operator”
means any party other than Assignor that may from time to time act as the
operator for one or more of the Subject Interests pursuant to an Operating
Agreement. 

          “Operating
Agreement” means any operating agreement in effect from time to time
affecting the Subject Interests between Assignor and other Working Interest
owners and agreements with any Operator related to the operation of the Subject
Interests, all as the same may be modified and amended from time to time;
provided, however, any operating agreement 

6 




which becomes effective after the Effective Date shall not be
effective and binding on Assignee unless and until either Lender or Assignee
consents to and approves of such operating agreement in writing, such approval
not to be unreasonably withheld; and provided further, with respect to the
Subject Interests described in Exhibit A, any operating agreement
described on Exhibit A that is contemplated in the farmout, development
or other agreement giving rise to Assignor’s right to earn interests shall be
effective and binding on Assignee. 

          “Permitted
Encumbrances” means (a) minor irregularities in title which do not (i)
materially interfere with the occupation, use and enjoyment by Assignor of any
of its Subject Interests, or (ii) materially impair the value thereof, (b) Liens
of landlords, vendors, carriers, warehousemen, mechanics, operators, laborers
and materialmen arising by law, and of Operators and non-operators arising by
contract under Operating Agreements, in the ordinary course of business for sums
not yet due or being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be required by GAAP
shall have been made therefor, (c) this Net Profits Overriding Royalty Interest,
(d) the specific exceptions, encumbrances and agreements described on Exhibit
A and affecting one or more of the Subject Interests INSOFAR ONLY as said
exceptions, encumbrances and agreements are valid and subsisting and are
enforceable against the particular Lease which is made subject to said
exceptions, encumbrances or agreements and (e) any agreement, including an
Operating Agreement, approved by Lender or Assignee. 

          “Person”
means an individual, corporation, partnership, limited liability company, joint
venture, trust or unincorporated organization, joint stock company or other
organization, government or any political subdivision thereof, a court, or any
other legal entity, whether acting in an individual, fiduciary or other
capacity. 

          “Processing”
means to manufacture, fractionate or refine Subject Hydrocarbons, but such term
does not mean or include (a) the use of standard lease, well or platform
equipment (such as dehydrators, Natural Gas treating facilities, separators,
heater treaters, lease compression facilities, injection or recycling equipment,
tank batteries, field gathering systems, pipelines and equipment) or (b) other
standard operations on any of the Subject Interests. 

          “Production
Costs” means from and after the Commencement Date, on a cash accounting
basis, the aggregate, without duplication, of Assignor’s proportionate share of
the following costs and expenses actually incurred and paid by Assignor with
respect to the Subject Interests from and after the Commencement Date: 

          (a)      all
lease operating expenses, including, without limitation, direct costs of
operating, producing, maintaining, abandoning and decommissioning the Subject
Interests as invoiced to and paid by Assignor or by the Operator calculated in
accordance with the COPAS; 

          (b)      all
direct costs of gathering, transporting, treating and marketing production from
the Subject Interests calculated in accordance with the COPAS; 

7 




          (c)      all
Taxes incurred by Assignor with respect to the ownership, development and
production of the Subject Interests and the Subject Hydrocarbons after the
Commencement Date (but excluding taxes based upon the income of Assignor); and


          (d)      all
Manufacturing Costs; 

provided, however, that “Production Costs” shall
not include any general and administrative expenses of Assignor and if at
the time in question, there is no Operating Agreement then in effect, Assignee
shall consent in writing , such consent not to be unreasonably withheld, to all
COPAS costs prior to inclusion of such costs in “Production Costs.”
Notwithstanding anything to the contrary set in this Conveyance, Production
Costs shall be reduced by the following: 

          (1)     
all proceeds received by Assignor from the Sale, from and after the Commencement
Date, of any materials, supplies, equipment and other personal property or
fixtures, or any part thereof or interest therein, located on or used in
connection with the Subject Interests; 

          (2)      all
insurance proceeds received by Assignor as a consequence of the loss or damage
from and after the Commencement Date to the Subject Interests, or any part
thereof or interest therein, or any materials, supplies, equipment or other
personal property or fixtures located on or used in connection with any of the
Subject Interests or any Subject Hydrocarbons unless such proceeds are used by
Assignor within one hundred eighty (180) days of receipt to replace any such
lost or damaged materials, supplies, equipment and other personal property; 

          (3)      the
proceeds of all judgments and claims received by Assignor (net of all reasonable
and necessary costs and expenses incurred by Assignor to receive such proceeds
of judgments and claims) for damages from and after the Commencement Date
directly or indirectly related to the Subject Interests or the Subject
Hydrocarbons, or any part thereof or interest therein, or any materials,
supplies, equipment or other personal property or fixtures, or any part thereof
or interest therein, located on or used in connection with any of the Subject
Interests or any Subject Hydrocarbons and which is specifically allocated to the
Subject Interests, the Subject Hydrocarbons or the materials, supplies,
equipment or other personal property or fixtures or any party thereof located on
or used in connection with any of the Subject Interests or any Subject
Hydrocarbons unless such proceeds are used or committed to be used by Assignor
within ninety (90) days of receipt to replace any such damaged materials,
supplies, equipment or other personal property or fixtures; 

          (4)      all
proceeds net of any reasonable and necessary costs and expenses incurred by
Assignor of and/or from each of the following amounts received by Assignor (to
the extent attributable to periods from and after the Commencement Date) with
respect to the Subject Interests (i) delay rentals, (ii) lease bonuses, (iii)
shut in Natural Gas well royalties or payments, (iv) rentals from reservoir use
or storage, (v) payments in connection with the drilling or deferring of any
Well on any of the Subject Interests and (vi) all other proceeds from whatever
source relating to the Subject Interests or the Subject Hydrocarbons and not
included in Gross Proceeds (including, without limitation, 

8 




fees for the use of any platform used
in the production of the Subject Hydrocarbons or for the processing or treating
of Hydrocarbons on behalf of a third party); and 

     (5)     
all credits received by Assignor from and after the Effective Date attributable
or related to Production Costs or Capital Costs incurred and paid from and after
the Commencement Date. 

To the extent that Production Costs are reduced below zero for
any Month, the amount of such reduction below zero shall be carried forward and
utilized in the calculation of Production Costs in subsequent Months until the
negative balance has been eliminated. 

          “Remaining
Net Profit” means, with respect to each Month, an amount equal to the Net
Profit for such Month minus the Net Profits Overriding Royalty Interest for such
Month. 

          “Sale”
means any sale, exchange, or other disposition for value. 

          “Sales
Contracts” means all contracts and agreements for the Sale of, or commitment
to sell, or right of first refusal to purchase Subject Hydrocarbons from the
Subject Interests. 

          “Subject
Hydrocarbons” means that portion of the Hydrocarbons that may be produced
from the Subject Interests and which are attributable to the Subject Interests
after deducting (i) all royalties, overriding royalties, production payments and
other burdens on or out of production from the Subject Interests to the extent
and only to the extent in effect on the Effective Date, but without any
deduction for the Net Profits Overriding Royalty Interest and (ii) any Lease Use
Hydrocarbons. 

          “Subject
Interests” means (a) all rights, title, claim or interest which Assignor has
on the Effective Date in each Lease, each Unit, and all leasehold, mineral and
other interests described in Exhibit A and any and all extensions,
renewals or replacements thereof in which Assignor now owns or hereafter
acquires an interest and the rights appurtenant to any of the foregoing, if any,
in and under any operating, unitization and pooling agreements and the Units
created thereby, and (b) all rights, title, claim or interest which Assignor has
on the Effective Date to share, pursuant to any Unit agreement or otherwise, in
the production of the Subject Hydrocarbons allocable or attributable to the
Leases, each Unit and all leasehold, mineral and other interests described in
Exhibit A, regardless of whether such right, title, claim or interest be
under or by virtue of a Lease, a sublease, an assignment, a unitization or
pooling agreement, a unitization or pooling order, a mineral deed, a royalty
deed, a mineral servitude deed, an Operating Agreement, a division order, a
transfer order or any other type of contract (including a farmout agreement or
development agreement), conveyance or instrument or under or by virtue of any
other type of claim of title, legal or equitable, recorded or unrecorded, even
though Assignor’s interests be incorrectly or incompletely described in, or a
description thereof be omitted from, Exhibit A. Except as set forth
hereinabove, Subject Interests (i) shall be enlarged by the discharge of any
payments out of production or by the removal of any charges or encumbrances to
which any of the same are subject, or any modification of any operating
agreement or Unit agreement, (ii) shall include any and all renewals and
extensions of any of the same, and all additional interests acquired by Assignor
in any Lease, Unit, minerals, notwithstanding the descriptions contained in
Exhibit A, (iii) shall reflect the economic benefit 

9 




realized by Assignor in connection with any “non-consent”
penalties other than the non-consent penalty provided for in Section
7.2(b) herein and (iv) shall reflect the economic detriment suffered by
Assignor in connection with any “non-consent” penalties imposed on Assignor or
its interest. 

          “Taxes”
means all ad valorem, property, occupation, gathering, windfall profit,
severance, gross production, energy, excise and other taxes and governmental
charges and assessments (except taxes on or measured by the income of Assignor
or Assignee) imposed on the Subject Interests, Subject Hydrocarbons or the Net
Profits Overriding Royalty Interest. 

          “Unit”
means a pooled unit or proration unit as designated by an effective designation
of unit, proration unit plan, or other instrument of similar impact properly
filed with the appropriate Governmental Authority. 

          “Working
Interest” shall mean the cost-bearing property interest (record title or
operating rights) which entitles the owner thereof to explore and develop
certain land for Hydrocarbon production purposes, whether under a Hydrocarbon
lease or unit, a compulsory pooling order or otherwise. 

          Section
1.2      Other Definitions. Other capitalized
terms used herein and not defined in Section 1.1 above or otherwise
defined in this Conveyance shall have the meaning ascribed to such term in the
Credit Agreement. 

          Section
1.3      Construction. The headings in this
Conveyance are for the convenience of reference only and shall not affect the
interpretation of this Conveyance. Whenever the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter, and the
number of all words shall include the singular and plural. The words “include,”
“includes” and “including” are deemed to be following by “without limitation.”
The words “hereby,” “herein,” “hereunder,” “hereinbefore,” “hereinafter” and
other equivalent words refer to this Conveyance in its entirety and not solely
the particular portion of the Conveyance in which such word is used. Unless
otherwise specified, references in this Conveyance to “Sections,” “Subsections”
or “Articles” refer to the sections, subsections or articles in this Conveyance.


ARTICLE II 
PAYMENT OF NET PROFITS OVERRIDING
ROYALTY INTEREST 

          Section
2.1      Payment. Beginning on the
twentieth (20th) day of the calendar month immediately following the
Commencement Date and on the same day of each calendar month thereafter
(provided, however, if such day is not a Business Day then payment
shall be made on the first Business Day prior to said date), Assignor shall pay
to Assignee the Net Profits Overriding Royalty Interest to Assignee with respect
to the immediately preceding Month (except for the first such payment which
shall include the period commencing with the Commencement Date through the end
of the aforementioned immediately preceding Month) as follows: 

10 




If by wire transfer: 

Bank of New York 
New York, NY 10004

ABA #021000018 
SWIFT: IRVTU53N 

Favour: 

Macquarie Bank Limited 
Sydney

A/C No. 8900055375 
CHIPSUID 236386 
Further Add: Macquarie Americas
Corp. 
Reference: Doral Energy Corp. 

If by check, checks should be made
payable to Macquarie Bank Limited and mailed to: 

Macquarie Bank 
PO Box 14107A

Newark NJ 07198-0107 
Reference: Doral Energy Corp. 

          The
directions for payments can be modified by written notice to Assignor pursuant
to Section 10.1. 

          Section
2.2      Interest on Past Due Payments. Any
amount not paid by Assignor to Assignee, within ten (10) days after the due
date, shall bear, and Assignor shall pay, interest in an amount equal to the
Base Rate in effect on such due date and such interest shall be paid from the
expiration of the ten (10) day grace period until such amount is paid;
provided, however, such interest shall not be in excess of the
Maximum Rate. No payment shall be considered to be past due if made within one
hundred twenty (120) days after the end of the calendar month of the first Sale
of production from a Well or Wells located on lands covered by the Subject
Interests. 

          Section
2.3      Overpayment. If at any time Assignor
inadvertently pays Assignee more than the amount due, Assignee shall not be
obligated to return any such overpayment, but the amount or amounts otherwise
payable for any subsequent period or periods shall be reduced by such
overpayment. 

          Section
2.4      Remaining Net Profits. Assignor shall
be entitled to retain each Month the amount of any Remaining Net Profit. 

ARTICLE III 
TITLE AND MARKETING OF HYDROCARBONS


          Section
3.1      Title. Assignor has and will
maintain Defensible Title to the Subject Interests until all or any part of the
Subject Interests expire in accordance with the Lease terms or 

11 




Assignor surrenders, abandons, sells or assigns all or any part
of the Subject Interests pursuant to the terms hereof. 

          Section
3.2      Marketing. Assignor shall have a
duty to market or cause to be marketed the Subject Hydrocarbons at the same
prices and on the same terms Assignor obtains for Hydrocarbons not subject to
this Conveyance which are of the same type and in the same location. Assignor
will bring the Subject Hydrocarbons to market with reasonable business judgment
and reasonable Crude Oil and Natural Gas field practices consistent with
industry practices. 

          Section
3.3      Taking Production In-Kind.
Assignee reserves the right, exercisable at Assignee’s sole risk and expense
after giving Assignor forty-five (45) days written notice, at any time and from
time to time as long as this Conveyance is in effect, to market, take in-kind or
have delivered to Assignee’s designated purchaser, the Applicable Percentage of
Hydrocarbons attributable to the Subject Interests and in which event, Assignee
shall have sole responsibility for any processing thereof at Assignee’s sole
cost and expense. If Assignee exercises the right to take in-kind, the following
shall be performed at Assignee’s cost and expense: (a) the Subject Hydrocarbons
taken in kind shall be delivered at a convenient point near the wellhead or the
connecting pipeline at which point it shall be metered, if necessary, through a
meter approved by Assignor; (b) any authority or permit required from any
Governmental Authority having jurisdiction shall be secured; (c) all necessary
reports to any such Governmental Authority shall be prepared and filed; and (d)
Assignee shall cause Assignee’s designated purchaser to pay directly (i) all
Taxes described in clause (c) of the definition of “Production Costs” and (ii)
all royalties owed to third parties, in each instance, to the extent those Taxes
or royalties are attributable to the Subject Hydrocarbons purchased and upon
payment of such Taxes or royalties, furnish evidence of such payment to
Assignor. If Assignee elects to exercise its right to take in-kind as provided
herein, Assignor will invoice Assignee for all Production Costs and, if
applicable, Capital Costs (collectively, the “Invoiced Costs”), that
would have otherwise been utilized to calculate Monthly Net Profit hereunder
and, within thirty (30) days after receipt of such invoice, Assignee shall remit
to Assignor the Applicable Percentage of such Invoiced Costs. Notwithstanding
anything to the contrary in this Section 3.3, under no circumstances will
Assignee ever have an obligation to remit to Assignor during any Month (pursuant
to an invoice delivered to Assignee by Assignor in accordance with the
immediately preceding sentence) Invoiced Costs in excess of an amount (the
“Net Marketing Proceeds”) equal to the aggregate proceeds received from
Assignee’s designated purchaser during that same Month less all amounts to be
paid directly by Assignee’s purchaser pursuant to this Section 3.3. To
the extent the Invoiced Costs for any Month exceed the Net Marketing Proceeds,
the amount of such excess will be carried forward and utilized in the
calculation of Invoiced Costs in subsequent Months until the negative balance is
eliminated. If the NPI has been partially assigned, each Person to whom the NPI
has been assigned must participate in the election to take the Subject
Hydrocarbons in kind or the election shall not be effective. 

ARTICLE IV 
OPERATION OF LEASED PREMISES 

          Section
4.1      Lease Covenants. Assignor agrees to use
commercially reasonable efforts where consistent with the standards of a
reasonable and prudent operator, if Assignor is the 

12 




operator, or if Assignor is not the operator, to use
commercially reasonable efforts to cause the Operator, to keep and perform all
of the material terms, conditions, and covenants of the Leases to be kept and
performed by the lessee thereunder and agrees to give Assignee the benefit of
each of said covenants, including, without limitation, protecting the Subject
Interests against drainage by reason of production from other properties.
Assignor shall have no obligations, either express or implied, by reason of this
Conveyance, to keep and maintain the Leases in force and effect either by the
payment of rentals, compensatory royalties or other payments or by the drilling
of any Wells upon the lands with respect to which the Net Profits Overriding
Royalty Interest in the Leases is herein assigned, it being expressly understood
that Assignee is to receive said Net Profits in such production only out of the
Subject Hydrocarbons, if, as and when produced and saved under the terms and
provisions of the Leases. Assignor shall have the right to obtain from the
lessors of the Leases or other parties or Governmental Authorities without
further consent of Assignee such modification agreements or time extensions as
Assignor may elect; provided, however, that no such modification
agreements or time extensions shall reduce the amount of the Net Profits
Overriding Royalty Interest or prejudice Assignee’s rights in any material
respect. Assignor further reserves the right, without the further consent or
joinder of Assignee, to unitize, pool or otherwise combine all or any portion of
the Leases and the lands covered thereby with any other lands or leases, on the
terms and conditions set forth in the Leases. 

          Section
4.2      Operations. Assignor agrees to conduct
and carry on, or use its commercially reasonable efforts to cause the Operator
to conduct and carry on, all operations respecting the Leases as a reasonably
prudent operator and in accordance with generally accepted engineering and
industry practices and to cause (or, with respect to Leases where Assignor is
not the operator, use commercially reasonable efforts to cause) every Well
within the lands covered by the Leases to be operated in a good and workmanlike
manner, and all improvements and equipment necessary or useful to the operation
of the same to be provided and all to be done that a reasonably prudent operator
would do, including cleaning out, reconditioning, plugging back or deepening
operations where necessary to the end that every Well within the lands covered
by the Leases shall be produced to maximize returns to Assignor and Assignee.
Nothing herein contained, however, shall obligate Assignor to continue to
operate any Well within the lands covered by the Leases when the Well ceases to
produce or, in the opinion of a reasonably prudent operator, is not capable of
producing Crude Oil, Natural Gas or other Hydrocarbons in paying quantities. For
purposes of the preceding sentence production “in paying quantities” with
respect to a Well shall mean production at such levels as to generate, on an
annual basis, total revenue net of landowners’ royalties, production payments,
net profits interests (but excluding the Net Profits Overriding Royalty Interest
conveyed hereby) and other burdens existing on the Effective Date, greater than
operating expenses for such Well. 

          Section
4.3      Surrender or Termination. Assignor
agrees that, without Assignee’s prior written consent, it will neither terminate
any of the Leases nor surrender or release any of the lands covered thereby
except (a) in connection with the abandonment of a Well in compliance with
Section 4.2 above, or (b) any undeveloped lands or any Lease covering
only undeveloped lands which may be surrendered, released or terminated so long
as no Affiliate of Assignor shall acquire an interest in such lands within one
(1) year after the lapse, release, termination or surrender thereof (whether
voluntarily or involuntarily), without prior written consent of Assignee. If
Assignee does not consent to Assignor’s proposal to terminate or release any of
the 

13 




Subject Interests, Assignor shall assign such Subject Interests
to Assignee and thereafter Assignee shall have sole responsibility for the
obligations related to such Subject Interests. Assignor shall give Assignee
written notice prior to the lapse, release, termination or surrender of any
Lease. If Assignor or any Affiliate of Assignor re-leases or re-lets any of the
lands covered by a lapsed, released, terminated or surrendered Lease within one
(1) year from the lapse, release, termination or surrender of the Lease, such
renewal or new lease shall become subject to the terms of this Conveyance.
Assignor shall, promptly upon the request of Assignee and at the sole cost of
Assignor, cause such Affiliate to execute such documents or take such other
actions as Assignee may reasonably request to evidence the conveyance to
Assignee of a Net Profits Overriding Royalty Interest in such new or renewed
lease. 

          Section
4.4      Assignor Discretion. Notwithstanding
anything herein to the contrary, Assignee will have no right to direct
operations on the Subject Interests. 

ARTICLE V 
UNITIZATION 

          Section
5.1      Pooled Subject Interests. To the extent
one or more of the Subject Interests have been pooled and unitized, such Subject
Interests are and shall be subject to the terms and provisions of such pooling
and unitization agreements, and the Net Profits Overriding Royalty Interests in
each such Subject Interest shall apply to and affect only the production from
such Units which accrues to such Subject Interest under and by virtue of the
applicable pooling and unitization agreements. 

          Section
5.2      Right to Pool. Assignor shall have the
right and power to pool and unitize any of the Subject Interests and to alter,
change or amend or terminate any pooling or unitization agreements heretofore or
hereafter entered into, as to all or any part of the land covered hereby, as to
any one or more of the formations or horizons hereunder, and as to any one or
more Subject Hydrocarbons, upon such terms and provisions as Assignor shall in
its sole and reasonable discretion determine. If and whenever through the
exercise of such right and power, or pursuant to any law hereafter enacted or
any rule, regulation or order of any Governmental Authority hereunder
promulgated, any of the Subject Interests are pooled or unitized in any manner,
the Net Profits Overriding Royalty Interest insofar as it affects such Subject
Interest shall also be pooled and unitized and in any such event such Net
Profits Overriding Royalty Interest in such Subject Interest shall apply to and
affect only the production which accrues to such Subject Interest under and by
virtue of the pooling and unitization. 

ARTICLE VI 
GOVERNMENT REGULATION AND TAXES


          Section
6.1      Government Regulations. All obligations
of Assignor hereunder shall be subject to all applicable laws of the federal
government and any other state or local government having jurisdiction, as well
as to the applicable rules, regulations and orders of any other Governmental
Authority having jurisdiction. 

          Section
6.2      Taxes. Assignor shall pay all Taxes
incurred with respect to the Subject Interests when due except to the extent
contested in good faith. In the event Assignor fails to pay 

14 




any Taxes which could result in the imposition of Liens and
encumbrances which could adversely effect the Net Profits Overriding Royalty
Interest conveyed herein, Assignee shall have the right to make the payment of
such Taxes on behalf of Assignor. To the extent Assignee pays any such Taxes on
behalf of Assignor, Assignor shall immediately reimburse Assignee for such
amounts upon demand. If Assignor does not reimburse Assignee for such amounts
prior to the next date on which Assignor is required to pay the Net Profits
Overriding Royalty Interest to Assignee pursuant to Section 2.1 above,
Assignor shall reduce the amount of Production Costs deducted in calculating Net
Proceeds for the applicable Month by an amount equal to (a) the amount of Taxes
paid by Assignee pursuant to this Section 6.2 multiplied by (b) an
amount equal to one minus the Applicable Percentage and plus (c)
any interest accruing (pursuant to Section 2.2 above) on the
amount of Taxes paid by Assignee since the date of demand. 

ARTICLE VII 
ASSIGNMENTS, CHANGE OF OWNERSHIP AND
CAPITAL COSTS 

          Section
7.1      Assignment. Assignor shall have the
right to assign, sell, transfer, convey, mortgage or pledge the Subject
Interests, or any part thereof, subject to the Net Profits Overriding Royalty
Interest and the terms and provisions of this Conveyance, without Assignee’s
prior approval; provided, however, that (a) any such assignment
during the term of the Credit Agreement must be in accordance with and subject
to the terms of the Credit Agreement and (b) if Assignor sells the Subject
Interests, Assignor must sell all of the Subject Interests and such sale must be
made to a single purchaser. Assignee has the right to assign the Net Profits
Overriding Royalty Interest in whole or in part; provided,
however, that (a) such assignment shall not cause the Assignor to make
multiple payments of the Net Profits Overriding Royalty Interests to more than
one Person, (b) if there are multiple Assignees, they must designate one
administrative agent to whom payments are made, notices are given and from whom
approvals are sought and (c) any partial sales shall be as to an undivided
interest in all of the Subject Interests. No change of ownership or right to
receive payment of the Net Profits Overriding Royalty Interest, or of any part
thereof, however accomplished, shall be binding upon Assignor until notice
thereof shall have been furnished by the Person claiming the benefit thereof,
and then only with respect to payments thereafter made. Notice of sale or
assignment shall consist of a copy of the recorded instrument accomplishing the
same; notice of change of ownership or right to receive payment accomplished in
any other manner (for example by reason of incapacity, death or dissolution)
shall consist of copies of recorded documents and complete proceedings legally
binding and conclusive of the rights of all parties. Until such notice shall
have been furnished to Assignor as provided above, the payment or tender of all
sums payable on the Net Profits Overriding Royalty Interest may be made in the
manner provided herein precisely as if no such change in interest or ownership
or right to receive payment had occurred. Upon request by Assignee, Assignor
shall, at the expense of Assignee, execute and deliver revised conveyances to
Assignee and to any Person to whom Assignee has assigned all or any portion of
this Net Profits Overriding Royalty Interest to reflect such assignment by
Assignee. All of the covenants and agreements of Assignor contained in this
Conveyance shall be deemed to be covenants running with the land and the Subject
Interests to the fullest extent permitted by applicable law and shall be binding
upon all successors in interest to, and all assigns of, Assignor and shall inure
to the benefit of all successors in interest to, and all assigns of, Assignee.
Likewise, all of the covenants and agreements of Assignee contained in this
Conveyance shall be deemed to be covenants running with the land and the Subject
Interests to the fullest extent permitted by 

15 




applicable law and shall be binding upon all successors in
interest to and all assigns of, Assignee and shall inure to the benefit of all
successors in interest to, and all assigns of, Assignor. All references herein
to either Assignor or Assignee shall include their respective successors and
assigns. An extract, memorandum or notice of this Conveyance may be filed in the
records of any county where the Subject Interests are located and with any
Governmental Authority deemed necessary by Assignor or Assignee. Neither party
shall make any assignment to any Person which would result in the forfeiture or
loss of any interest in the Leases under the laws of the United States of
America or any of the several States. 

          Section
7.2      Capital Costs. 

          (a)      From
and after the Commencement Date, Assignor shall submit in writing to Assignee
for review all AFEs related to costs and expenses which would comprise Capital
Costs and request that Assignee notify Assignor which (and, if so, to what
extent) costs and expenses detailed on such AFE will comprise Capital Costs for
the purpose of calculating Net Profit under this Conveyance; provided,
however, no such written submission is required for emergency operations
or to ensure compliance with Environmental Laws and Governmental Requirements
(both as defined in the Credit Agreement). In the event Assignor is the operator
of the Subject Interest for which the Capital Cost is to be incurred, Assignor
shall submit such AFEs to Assignee the earlier of (i) the date other interest
owners of the Subject Interests are notified of the proposed expenditure and
(ii) fifteen (15) business days prior to the proposed date of incurring such
expenditure. In the event Assignor is not the Operator of the Subject Interests
in which the proposed Capital Cost is to be incurred, Assignor shall notify
Assignee within forty-eight (48) hours after receipt of the AFE from the
Operator proposing the expenditure. Assignee shall have the lesser of (i)
fifteen (15) days after receipt of the proposed AFE from Assignor or (ii) one
(1) Business Day (as business days are determined in the relevant Operating
Agreement, or if not determined in an Operating Agreement, as business days are
defined in the Credit Agreement) less than the time permitted under the
applicable Operating Agreement (Assignor must specify in any notice to Assignee
the date and time by which Assignee is required to respond as determined by the
applicable Operating Agreement) to notify Assignor in writing whether it permits
the deduction of all or any portion of the Capital Costs included in the
submitted AFE in the calculation of Net Profit. Notwithstanding the foregoing,
if the AFE pertains to the drilling of a Well where a drilling rig is on
location, then notice may be given telephonically and Assignee shall have at
least forty-eight (48) hours (exclusive of Saturday, Sunday and legal holidays)
from the time of such notice to notify Assignor (which notice may also be
telephonic) whether it will permit the deduction of all or any portion of the
Capital Costs included in the submitted AFE in the calculation of Net Profit;
provided, however, if the subject Operating Agreement provides for
less than forty-eight (48) hours notice, then Assignor shall include in its
notice to Assignee a statement as to the notice period provided by the
applicable Operating Agreement and Assignee shall respond within such time
period as provided in the Operating Agreement. Should Assignee fail to respond
within the applicable time period, then Assignee shall be deemed to have
disallowed the deduction of any such Capital Costs in the calculation of Net
Profit. Assignor shall be entitled to rely upon any notice delivered to Assignor
by a person authorized to deliver 

16 




notices on behalf of Assignee, and
shall not be required to poll all persons authorized to receive notices on
behalf of Assignee. 

          (b)      To
the extent Assignee does not permit (either through a notice in writing or a
deemed disallowance) the deduction of any Capital Costs included in any AFE
submitted by Assignor in the calculation of Net Profit, Assignor shall be
entitled to receive additional proceeds from the Subject Interest(s) and only
from the Subject Interest(s) (if any) for which such disallowed item or items
pertain in an amount equal to two hundred percent (200%) of the value of the
costs and expenses for which Assignee has not permitted the deduction in the
calculation of Net Profit. Assignor shall provide Assignee a reconciliation
statement each month with the monthly statements provided in accordance with
Section 8.2 showing the payoff status of the non-permitted deduction item
or items for each applicable Subject Interest. 

          (c)      In
the event Assignee has, in accordance with Section 7.2(b), refused to
permit the deduction of any Capital Costs in the calculation of Net Profit, (i)
the proceeds attributable to the affected Subject Interest(s) shall be excluded
from the calculation of Gross Proceeds during the period from the date of
Assignor’s initial expenditure of the costs in question until Assignor has
recovered the additional proceeds described in Section 7.2(b), and (ii)
the Production Costs otherwise attributable to such affected Subject Interests
shall be excluded from the calculation of the Production Costs during such
period of time. 

          Section
7.3      Conversion Agreement. This Net
Profits Overriding Royalty Interest Conveyance is subject in all respects to the
rights of Assignor and Assignee pursuant to the Conversion Agreement. 

ARTICLE VIII 
RECORDS AND REPORTS 

          Section
8.1      Books and Records. Assignor shall at
all times maintain true and correct books and records sufficient to determine
the amounts payable to Assignee hereunder including, but not limited to, a Net
Profits Overriding Royalty Interest account which will record all Gross
Proceeds, Production Costs and Capital Costs from which the Net Profits
attributable to the Net Profits Overriding Royalty Interest is calculated. 

          Section
8.2      Inspections; Exception to
Payments. Subject to the time limitations set forth in Section 8.4,
the books and records referred to in Section 8.1 shall be open for
inspection by Assignee or its duly authorized representative at the office of
Assignor during normal business hours. Assignor will permit any one or more
representatives designated by Assignee to make such inspections of the Subject
Interests at any reasonable time as such representatives deem proper, at the
sole risk and expense of Assignee, and, if the Subject Interests are operated by
a Operator, Assignor shall utilize its commercially reasonable efforts to permit
such access by Assignee’s representatives, and, in either case, subject to any
safety or other requirements which are imposed by Assignor as operator or the
Operator, if Assignor is not the operator, and will furnish to Assignee, if and
whenever requested, such detailed information as Assignee may reasonably request
concerning the Subject Interests, the operation thereof, the Subject 

17 




Hydrocarbons and the determination of the Net Profits
Overriding Royalty Interest hereunder, but subject to any confidentiality
restrictions which may then be in effect with respect to any such detailed
information. The acceptance by Assignee of any payment hereunder shall not
preclude Assignee from taking exception to the correctness of the amount
thereof; provided, however, that any such exception must be
specified by Assignee and a notice given to Assignor. 

          Section
8.3      Monthly NPI Operating Statement.
Commencing on the 15th day of the calendar month following the
Commencement Date, and on the 15th day of each succeeding calendar
month (the “NPI Operating Statement Due Date”), Assignor shall deliver to
Assignee an operating statement in substantially the form of Exhibit B
(“NPI Operating Statement”), which NPI Operating Statement, with respect
to the Month ending immediately prior to the NPI Operating Statement Due Date,
shall show the detailed and itemized computation of the Monthly Net Profit and
Net Profits Overriding Royalty Interest due Assignee under Section 2.1 of
this Conveyance. Each NPI Operating Statement, with respect to the Month ending
immediately prior to the applicable NPI Operating Statement Due Date, shall
include and contain, in addition to the foregoing, (a) the Gross Proceeds, (b)
the Production Costs paid, payable and/or processed for payment or
reimbursement, (c) the Capital Costs paid, payable and/or processed for payment
or reimbursement, (d) other such Gross Proceeds, Production Cost and Capital
Cost verification as may be required by Exhibit B, and (e) the Remaining
Net Profit. 

          Section
8.4      Assignee’s Exceptions to Monthly
Statements. If Assignee shall take exception to any item or items included
in any NPI Operating Statement rendered by Assignor, Assignee shall notify
Assignor in writing within twelve (12) calendar months after the receipt of such
statement, setting forth in such notice the specific charges complained of and
to which exception is taken or the specific credits which should have been made
and allowed, and with respect to such complaints and exceptions as are
justified, an adjustment shall be made. After the expiration of such twelve (12)
calendar month period after Assignee’s receipt of any NPI Operating Statement,
Assignee shall not be entitled to receive, and Assignor shall not be obligated
to pay, any amounts with respect to the Net Profits Overriding Royalty Interest
otherwise payable to Assignee for the Month covered by such NPI Operating
Statement. 

          Section
8.5      Geological and Engineering Data.
Subject to any applicable contractual limitations of confidentiality or other
contractual restrictions with co-owners or other third parties, upon request by
Assignee, Assignor shall furnish to Assignee, at Assignee’s expense, copies of
and/or access to all seismic data, engineering reserve reports, electric and
other logs of the Leases and other geologic and geophysical data owned by or
under the control of Assignor, and Assignee shall also have access to all cores,
cuttings, and other geological, geophysical well and production data and maps
secured from, or prepared in connection with, operations on the Leases owned by
or under the control of Assignor. Assignee shall also have the right to receive,
within a reasonable period not to exceed thirty (30) days after Assignee’s
request, quarterly reports showing the status of development, production, and
other operations conducted on the Leases during the preceding quarter and the
preceding twelve calendar months. Assignor makes no representations regarding
the reliability or accuracy of any data provided to Assignee hereunder and shall
not be liable for the use of such information by Assignee or any third party.


          Section
8.6      Confidentiality. All information
furnished to Assignee pursuant to this Conveyance shall be confidential and for
the sole benefit of Assignee and its Affiliates, lenders 

18 




and assigns and shall not be disclosed by Assignee to other
Persons except its Affiliates, consultants, lenders, partners and prospective
purchasers of interests in the Net Profits Overriding Royalty Interest and
representatives and consultants retained to advise Assignee who agree to hold
such information as confidential, and except Governmental Authorities governing
Assignee to whom Assignee is obligated to disclose such information. 

ARTICLE IX 
NON-LIABILITY OF ASSIGNEE 

          Except
as provided in Section 3.3, in no event shall this Conveyance create or
be deemed to create any liability or responsibility on the part of Assignee for
any costs or liabilities incurred by Assignor or any other lessee attributable
to the Subject Interests or the Subject Hydrocarbons nor shall Assignee be
required to pay to Assignor any sums previously paid by Assignor to Assignee,
pursuant to this Conveyance. Subject to the provisions hereof, Assignor hereby
agrees to indemnify and hold Assignee harmless from and against any costs or
liabilities incurred relating to the Subject Interest or the Subject
Hydrocarbons. ASSIGNOR HEREBY AGREES TO INDEMNIFY AND HOLD ASSIGNEE HARMLESS
FROM AND AGAINST ANY COSTS OR LIABILITIES INCURRED RELATING TO THE SUBJECT
INTERESTS OR THE SUBJECT HYDROCARBONS EXCEPT FOR ANY COSTS AND LIABILITIES
ARISING OUT OF ASSIGNEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT;
PROVIDED, HOWEVER, THAT THE INDEMNIFICATION HEREBY GRANTED BY
ASSIGNOR SHALL NOT BE ASSIGNABLE BY ASSIGNEE AND SHALL NOT BE BINDING UPON
ASSIGNOR AS TO ANY PERSONS TO WHOM ASSIGNEE ASSIGNS ALL OR ANY PORTION OF THE
NET PROFITS OVERRIDING ROYALTY INTEREST. 

ARTICLE X 
MISCELLANEOUS 

     Section 10.1 Notices. Any
notice, demand or document which either party is required or may desire to give
hereunder shall be in writing and given by messenger, nationally recognized
courier, facsimile or other electronic transmission, or United States registered
or certified mail, postage prepaid, return receipt requested, addressed to such
party at its address and facsimile number shown below, or at such other address
as either party shall have furnished to the other by notice given in accordance
with this provision. 

If to Assignee: 

Macquarie Investments, LLC. 
125
West 55th Street, 22nd Floor 
New York, New York 10019

Attention:           Anthony
Lennon

Telephone:          (212)
548-2646

Facsimile:             (212)
399-8929

E-Mail:                 
anthony.lennon@macquarie.com

19 




with copies to: 

Macquarie Bank Limited 
Houston
Representative Office 
One Allen Center 
500 Dallas Street, Suite 3100

Houston, Texas 77002

Attention:           Michael
Sextro 
Telephone:         
(713) 275-6207

Facsimile:             (713)
275-6222

E-Mail:                 
michael.sextro@macquarie.com


and 

Macquarie Bank Limited 
Executive
Director-Metals and Energy Capital 
Level 15, No. 1 Martin Place 
Sydney

New South Wales 2000 
Australia

Attention:           Executive
Director

Telephone:          +61 2
8232 3333

Facsimile:            
+61 2 8232 3590

Email:                   
katie.choi@macquarie.com


If to Assignor, to: 

Doral Energy Corp. 
111 N.
Sepulveda Blvd., Suite 250 
Manhattan Beach, CA 90266-6821

Attention:           Mr.
Paul Kirkitelos

Telephone:         
310-990-8708

Facsimile:            
253-541-7833

E-Mail:                 
paulk@doralenergy.com 

and to 

Doral Energy Corp. 
3000 N.
Garfield, Suite 210 
Midland, Texas 79705

Attention:                Pat
Seale

Telephone:             
713-899-1712

Fax:                          
432-505-9746

E-Mail:                     
pats@doralenergy.com 

          Any
notice delivered or made by messenger, facsimile, or United States mail shall be
deemed to be given on the earliest date of actual delivery as shown by messenger
receipt, the 

20 




addressor’s facsimile machine confirmation or other verifiable
electronic receipt, or the registry or certification receipt. Assignee need not
delay action on notice transmitted orally by an authorized officer of Assignor
to Assignee until receipt of written confirmation of such notice. 

          Section
10.2      Term. This Conveyance shall remain in
force so long as any of the Subject Interests, or any portion thereof, are in
effect. 

          Section
10.3      Further Assurances. Should any
additional instruments of assignment and conveyance be required to describe more
specifically any interests subject hereto, Assignor agrees to promptly execute
and deliver the same upon the written request of Assignee. If any other or
additional instruments are required in connection with the transfer of state or
federal lease interests in order to comply with applicable law or regulations,
Assignor further agrees to promptly execute and deliver the same upon the
request of Assignee. 

          Section
10.4      Substitution of Warranty. This
instrument is made by Assignor with full substitution and subrogation of
Assignee in and to all rights and actions of warranty which Assignor has or may
have against any and all Persons, and in and to all covenants of warranty by any
and all Persons heretofore given or made with respect to the Subject Interests
or any part thereof or interest therein, to the extent of the interests granted
to Assignee herein. 

          Section
10.5      Intention of the Parties. Nothing
herein contained shall be construed to constitute either party hereto (under
state law or for tax purposes) the agent of, or in partnership with, the other
party. If, however, the parties hereto are deemed to constitute a partnership
for federal income tax purposes, the parties elect to be excluded from the
application of Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code
of 1986, as amended (the “Code”), and agree not to take any position
inconsistent with such election. Upon the request of either party, the parties
shall execute such evidence of such election as may be required by the Secretary
of the Treasury of the United States or the Internal Revenue Service, including,
without limitation, all of the returns, statements and data required by Treasury
Regulations §1.761, or any successor regulation thereto. If any present or
future income tax laws of the state or states which may require such filing or
any future income tax laws of the United States contain provisions similar to
those in Subchapter K, Chapter 1, Subtitle A of the Code, under which an
election similar to that provided by Section 761 of the Code is permitted, each
party shall make such election as may be permitted or required by such laws. In
addition, the parties hereto intend that the Net Profits Overriding Royalty
Interest conveyed hereby by Assignor to Assignee shall at all times be treated
as an “economic interest” in the Subject Hydrocarbons within the meaning of the
Code (or any corresponding provisions of succeeding law) provided that neither
party represents or warrants to the other party the tax effect of this
Conveyance. 

          Section
10.6      Binding Effect. This Conveyance shall
bind and inure to the benefit of the successors and assigns of Assignor and
Assignee. 

          Section
10.7      Effective Date. This Conveyance shall
be effective as of 7:00 a.m. local time on the date first set forth in this
Conveyance where each of the Subject Interests are located notwithstanding the
Commencement Date (the “Effective Date”). 

21 




          Section
10.8      Unenforceable or Inapplicable
Provisions. If any provision hereof is invalid or unenforceable in any
jurisdiction, the other provisions hereof shall remain in full force and effect
in such jurisdiction, and the remaining provisions hereof shall be liberally
construed in favor of Assignee in order to effectuate the provisions hereof, and
the invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of any such provision in any other jurisdiction. Any
reference herein contained to a statute or law of a state in which no part of
the Subject Interests is situated shall be deemed inapplicable to, and not used
in, the interpretation hereof. 

          Section
10.9      Affidavit. Assignor hereby
authorizes Assignee to prepare and file in the appropriate records where each of
the Leases is located an affidavit prepared by Assignee which sets forth the
Commencement Date and the Applicable Percentage. 

          Section
10.10      Rule Against Perpetuities Savings
Clause. It is not the intent of the parties that any provision herein
violate any applicable law regarding the rule against perpetuities, the
suspension of the absolute power of alienation or other rules regarding the
vesting or duration of estates, and this Conveyance shall be construed as not
violating such rule to the extent the same can be so construed consistent with
the intent of the parties. If, however, any provision hereof is determined to
violate such rule, then such provision shall nevertheless be effective for the
maximum period (but not longer than the maximum period) permitted by such rule
that will result in no violation. Any future interests created or contemplated
by this Conveyance which are determined to be subject to the Rule Against
Perpetuities shall, if they have not theretofore vested, be extinguished
whenever twenty one years less one day shall have elapsed after the death of the
survivor of Queen Elizabeth II of the House of Windsor, England, and Philip
Mountbatten, Prince Philip, Duke of Edinburgh, and their children and
grandchildren who are living at the date of the execution of this Conveyance.


          Section
10.11      Counterpart Execution. This
Conveyance may be executed in several original counterparts. Each counterpart
shall be deemed to be an original for all purposes, and all counterparts shall
together constitute but one and the same instrument; provided,
however, in making proof of this Conveyance, it shall only be necessary
to produce one counterpart hereof, executed by the parties hereto, and it shall
not be necessary to produce nor to account for any other counterpart. To the
extent permitted under the laws of any jurisdiction where this Conveyance is to
be filed, there may be attached to the counterpart of this Conveyance to be
filed in such jurisdiction an Exhibit A which shall contain only the
legal description of the Subject Interests encumbered by this Conveyance in such
jurisdiction and in all cases this Conveyance may be filed without attaching
Exhibit B. 

          Section
10.12      Governing Law. THIS CONVEYANCE SHALL
BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW MEXICO EXCEPT TO
THE EXTENT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE. 

          Section
10.13      WAIVER OF JURY TRIAL. TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, EACH OF THE UNDERSIGNED HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT WHICH IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY 

22 




AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
CONVEYANCE. 

[Signatures appear on the following page(s)] 

23 




          IN
WITNESS WHEREOF, each of Assignor and Assignee has caused this Conveyance to be
executed in its name and behalf by its proper signatory officers thereunto duly
authorized, in multiple originals, effective as of the date first set forth in
this Conveyance. 

ASSIGNOR: 

DORAL ENERGY
CORP., 
a Nevada corporation 

	 	By: 	/s/ Paul Kirkitelos 
	 	  	       
                 Paul Kirkitelos 
	 	  	       
                 President & CEO



ACKNOWLEDGMENT 

	STATE OF CALIFORNIA 	§ 
	  	§ 
	COUNTY OF Los Angeles 	§ 


          This
instrument was acknowledged before me on this 29 day of July, 2008, by Paul
Kirkitelos, President & CEO of Doral Energy Corp., a Nevada corporation.


	 	/s/
      Ellen Hageman 
	 	NOTARY PUBLIC, STATE OF CALIFORNIA
  


[SIGNATURE PAGE TO NET PROFITS OVERRIDING ROYALTY INTEREST
CONVEYANCE] 




          IN
WITNESS WHEREOF, each of Assignor and Assignee has caused this Conveyance to be
executed in its name and behalf by its proper signatory officers thereunto duly
authorized, in multiple originals, effective as of the date first set forth in
this Conveyance. 

ASSIGNEE: 

MACQUARIE
INVESTMENTS, LLC, 
a Delaware limited
liability company 

	 	By:	/s/
      Brian Hughes 
	 	Name:	Brian
      Hughes 
	 	Title:	Executive Director 
	 		 
	 	By:	/s/
      Paul B. Beck 
	 	Name:	Paul
      B. Beck 
	 	Title:	Executive Director 


ACKNOWLEDGMENTS 

	STATE OF TEXAS 	§ 
	  	§ 
	COUNTY OF HARRIS 	§ 


          This
instrument was acknowledged before me on this 29th day of July, 2008, by
Brian B. Hughes, Executive Director of MACQUARIE
INVESTMENTS, LLC, a Delaware limited liability company. 

	 	/s/
      Linda S. Cox
	 	NOTARY PUBLIC, STATE OF TEXAS




	STATE OF TEXAS 	§ 
	  	§ 
	COUNTY OF HARRIS 	§ 


          This
instrument was acknowledged before me on this 29th day of July, 2008, by Paul
B. Beck, Executive Director of MACQUARIE INVESTMENTS, LLC, a
Delaware limited liability company. 

	 	/s/
      Linda S. Cox 
	 	NOTARY PUBLIC, STATE OF TEXAS



[SIGNATURE PAGE TO NET PROFITS OVERRIDING ROYALTY INTEREST
CONVEYANCE] 




EXHIBIT A 

See attached. 








































































































































































































EXHIBIT B 

NPI Operating Statement 

See attached. 




DORAL ENERGY CORP

  Form of NPI Operating Statement 

  (schedules and supporting information to be attached) 

  Delivered: _____________, 20___.

I, ______________, the _______________ of Doral Energy Corp.
  (the "Company") hereby certifies that: (a) all of the information set forth
  herein and in all exhibits, attachments and/or schedules attached hereto, all
  of which are by reference true, correct and complete to the best of my knowledge,
  and (b) I have made a diligent effort to ensure that all facts relevant to the
  matters certified herein are known to me, by establishing and maintaining relevant
  records and procedures within the Company, and by making such inquiries as I
  have deemed necessary each month, procedures within the Company, of various
  officers, employees and/or consultants of the Company. This NPI Operating Statement
  is being delivered pursuant to that certain Net Profits Overriding Royalty Interest
  Conveyance dated effective July 29, 2008 (the "NPI Conveyance").

For purposes of this NPI Operating Statement, the term " Month"
  means ___________ 11, 20___. to ___________ 10, 20___.

	1. 	GROSS SALES VOLUMES. The gross
      sales volumes associated with the Gross Proceeds in item 2.






  	Crude Oil (Bbls) 	$	 - 	 
	Natural Gas (Mmbtu) 	$	 - 	 
	Flash Gas (Mcf) 	$	 - 	 






	2. 	GROSS PROCEEDS. The Gross Proceeds received
      by the Company during the Month are as follows:






  	Crude Oil 	$	 - 	 
	Natural Gas 	$	 - 	 
	Manufacturing Proceeds 	$	 - 	 
	Total 	$	 - 	 






	3. 	PRODUCTION COSTS. Production Costs paid
      and/or to be processed for payment by the Company with respect to the
      Month are as follows:






  	Direct costs of operating, producing, maintaining, adandoning and
        decommissioning. 	$	 - 	 
	Gathering, transporting, treating and marketing costs 	$	 - 	 
	Taxes (excluding taxes based upon the income of Assignor) 	$	 - 	 
	Manufacturing Costs 	$	 - 	 
	Less: 	 	 	 
	Net Sale proceeds of any materials, supplies, equipment and other
        personal property or fixtures 	$	 - 	 
	Insurance proceeds received by Assignor as a consequence a loss
        or damage 	$	 - 	 
	Proceeds from judgements and claims 	$	 - 	 
	Proceeds from delay
        rentals, lease bonuses, SI royalties or payments, reservoir use or storage
        rental, deferred drilling charges 	$	 - 	 
	Production & Capital Cost credits 	$	 - 	 
	Credits carried forward from previous months 	$	 - 	 
	Total 	$	 - 	 






	4 	Capital Costs. Capital Costs paid and/or
      to be processed for payment by the Company with respect to the Month are
      as follows:






  	Capital Costs 	$	 - 	 
	Total 	$	 - 	 






	5	NET PROFIT (item 2 less item 3 less item 4 )	 	$	 - 	 
	 	 	 	 	 	 
	6	 item 5) NET PROFITS OVERRIDING ROYALTY INTEREST
      (____% of(35% until USD $5M received by Assignee, 20% thereafter)

    	

       	$	 - 	 
	7	Remaining Net Profit 	 	$	 - 	 


Page 1 of 2




Attached as exhibits are a list of purchaser statements for the
  Month including copies, a list of all Production Cost payments made or processed
  for payment by the Company to any person with respect to the Month, indicating
  which category of Production Costs under item 3 that the payment relates, and
  a list of all Capital Cost payments made or processed for payment by the Company
  to any person with respect to the Month, indicating which AFE under item 4 that
  the payment relates including AFE estimate and funding to date.

 

	By: 	 	 
	 	 	 
	Name: 	 	 
	 	 	 
	Title: 	 	 
	 	 	 
	Date: 	 	 


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